Report: Gas impact fee revenue will keep declining

Pennsylvania will continue to see less money from natural gas drilling, according to a new analysis from the state’s Independent Fiscal Office. This year the drilling impact fees brought in $187.7 million— the lowest amount ever. The IFO projects revenue will continue to decline next year, potentially setting a new record low.
“The impact fee revenues are very sensitive to the average price of gas. What we’ve seen is a dramatic reduction in the average price,” says IFO director Matthew Knittel. “That is in turn reducing revenues.”
The research brief released Thursday finds the fees will decline between $5.4 million and $56.5 million next year, depending on whether the current slowdown in the industry improves, stays the same, or gets worse.
The IFO is charged with providing nonpartisan revenue projections and budgetary analysis to the state legislature and citizens. Over the past five years, the fees have brought in more than a billion dollars. Some of the impact fee money stays at the state level, but most goes to local governments and is distributed to the the counties and municipalities with the most shale wells. For 2015, Washington and Susquehanna counties got the most money– $5.6 million and $5.2 million respectively.
Newly-drilled wells pay the highest rate, and the fees decline annually as the well ages– ending completely after 15 years.The fee schedule is also adjusted annually to reflect the price of natural gas.
For the first half of 2016, Knittel says new well drilling was down 60 percent, compared to last year.

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